HMRC tax-free mileage allowance increase will ease pressure on the voluntary sector
Following an announcement by Chancellor Rachel Reeves on 21 May 2026, the HMRC tax-free mileage allowance will increase from 45p to 55p per mile, backdated to April 2026.
The increase is positive news for the voluntary sector, particularly for community transport services and volunteer drivers who have faced rising fuel costs in recent years, while the allowance had remained unchanged since 2011.
Clair Swales, PAVO CEO, said: “The voluntary sector has long felt the impact of the shortfall in the amount volunteer drivers can claim towards fuel costs, made worse as prices have risen this year due to geopolitical events.
“Community transport services across the county have struggled to recruit drivers, who play a vital role in our rural Powys communities, including taking some of our most vulnerable residents to essential hospital appointments.
Community transport a vital lifeline
“Community transport is often a lifeline for people who would otherwise struggle to attend hospital appointments or access services and social activities.
“The impact is felt even more keenly in rural areas, where people often have to travel much further to access services and where public transport options are limited.
“We’ve heard directly from organisations about the impact the 45p per mile rate has had on their day-to-day operations and have been campaigning on their behalf, lobbying both the Welsh and UK Governments to review the policy.”
David Chadwick, Member of Parliament for Brecon, Radnor and Cwm Tawe, raised the issue during a House of Commons debate on Government support for voluntary groups and community centres on 25 March. Click to watch here
Sector welcomes increase but pressures remain
While welcoming the announcement, Swales added: “This is clearly a step in the right direction and will help ease some of the financial burden on volunteer drivers and improve the sustainability of community transport services.
“However, I echo concerns raised by the Community Transport Association that, while the increase is welcome, many organisations will now face additional financial pressures in implementing the higher rate.
“Many voluntary organisations have already planned their 2026/27 budgets and funding applications around the previous 45p allowance, while also facing rising costs and increasing demand for services.”
Writing on Facebook, the Community Transport Association said:
“…there is still work to be done, as Community Transport now needs the financial resources to implement the new AMAP (Approved Mileage Allowance Payment) rate. Central, devolved and local government should deliver uplifts to grants and contracts which cover the additional costs. Voluntary organisations’ bids for grants and contracts for 2026/27 were based on the previous rate of 45p at a time when their budgets are already being squeezed by inflation and rising demand.”
Long-term investment still needed
Swales concluded: “The sector remains under significant pressure and we will continue to highlight the importance of long-term investment in the voluntary sector.”